More wirehouse brokers expected to bolt this year

More brokers should shift to the independent RIA channel this year as markets stabilize and retention deals wind down.

That’s the prediction of custodians, for whom last year was a mixed bag as flat but volatile markets made it difficult for many advisers to make major career changes.

Schwab Advisor Services welcomed about the same number of breakaway brokers as it did in 2010, bringing in 166 teams. Breakaway assets fell slightly to $12.1 billion, from $12.6 billion the year before.

“Movement seemed to slow in the fourth quarter,” compared with the prior nine months, said Tim Oden, senior managing director of business development.

He thinks that more movement will happen this year.

THE WAIT AT WIREHOUSES

Advisers seem to have delayed moves “until another tranche of their retention package wears off” early this year, Mr. Oden said.

“Our pipeline is strong, with more scheduled [transitions] over the next three months than we have ever seen in the past,” he said.

The firm holds $475 billion in assets on behalf of 3,300 advisers.

Wirehouse advisers are frustrated at the bureaucracy and managements of their firms, retention deals are wearing off, “and at the same time, firms in the independent space have come up with lot of solutions for advisers,” said Mindy Diamond, president of recruitment firm Diamond Consultants LLC, who agrees that 2012 should see more breakaways.

Observers said brokers have been waiting for portions of post-crisis retention and recruitment deals to be earned off this year, especially in the first quarter.

BOFA RETENTION DEAL

Bank of America Corp. gave Merrill Lynch & Co. Inc. brokers a retention deal in January 2009, followed by the newly combined Morgan Stanley Smith Barney LLC. At the same time, UBS Financial Services Inc. was recruiting aggressively.

“If [wirehouse] guys are in the latter years of a retention package [and] it’s the last move of their careers, they’ll probably go independent,” said Matt Cooper, managing member of Beacon Pointe Wealth Advisors LLC, an aggregator firm.

“They’re not going to sign [a deal for] another nine years,” said Mr. Cooper, who expects to add four to six adviser/partners this year, in addition to two partners added last year.

A report from Cerulli Associates Inc. this month predicts that the wirehouses’ market share of assets will drop from an estimated 43% last year to 35% in 2013.

At the same time, custodians continue to pick up representatives from independent broker-dealers.

Some independent broker-dealers have been forced to shut down due to problems with failed private placements and high regulatory costs, leaving reps looking for new homes.